Beware The False Hope in MBS Today

MBS ended up with a nice little rally after 2pm that brought prices 3/8ths higher.  Treasuries, on the other hand, set new long-term yield highs today.  The latter is where we would continue to look for general guidance on rate trends.  That's not to say 10s are destined to break above 4% and keep rising (totally possible, but not a given)--simply that the gains in MBS are specific to MBS (in case that wasn't already obvious).  Today's video talks more about the outperformance and the broader rate considerations.  There's a lot going on (in case that wasn't already obvious). 

Econ Data / Events
    • Durable Goods
      • -0.2 vs -0.4 f'cast
    • Core Cap-Ex (non-defense, excluding aircraft)
      • 1.3 vs 0.2 f'cast
    • FHFA Home Prices 
      • -0.6 vs +0.1 prev
    • Consume Confidence 
      • 108 vs 104.5 f'cast
    • New Home Sales
      • 685k vs 500k f'cast
Market Movement Recap
08:58 AM

Token recovery overnight, no reaction to Durable Goods, and now selling off a bit as bonds follow UK markets.  10yr still down 6.5bps at 3.864 and MBS up 11 ticks (.34), but down more than a quarter point from the highs.

09:31 AM

Gains mostly gone now with yields led higher by a sell-off in EU bonds.  MBS down 5/8ths intraday and up only 6 ticks (.19) from y'day.  10yr yields down only 3bps after being down more than 12bps at the best levels. 

11:21 AM

10yr in negative territory, up 3.5 bps at 3.966 and UMBS 5.0 still up almost an eighth of a point.

02:38 PM

Decent little bounce off the PM lows for MBS--now up more than 3/8ths on the day.  10yr still 2.7bps higher at 3.955.  No obvious catalyst.  2pm is more prone to volatility than the noon-2pm window.